Monthly Archives: December 2022

Misinformation About Social Security & Medicare is Harming America’s Elderly

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Dave Kingsley

Scapegoating the Elderly for U.S. Budget Deficits & Debt

Pie charts, bar charts, tables, graphs, and other depictions of the federal budget abound in the media. These pictorial representations of what Congress budgets for such things as education, agriculture, health care, and so forth invariably include all of Social Security and Medicare. Hence, they are consistently wrong. None of the expenditures for Social Security are budgeted and have absolutely no impact on the budget or deficits. Less than half of Medicare expenditures are budgeted because beneficiaries pick up a large amount of the costs.

Social Security benefits are “earned” by beneficiaries who have paid in during their working years through a payroll tax. Benefits for each beneficiary are actuarily tracked and payouts are based on what is paid in.

Dr. Max Skidmore, University of Missouri Curators’ Distinguished Professor of Political Science (Emeritus) explains the history and functioning of Social Security in an accompanying blog post today. Dr. Skidmore is a leading expert on Social Security and colleague of those of us contributing to this blog (see e.g. his book Securing America’s Future: A Bold Plan to Preserve and Expand Social Security with a Foreword by former senator George McGovern).

Over Half of Medicare is Paid for by Beneficiaries Through Payroll Taxes, Premiums, and Out of Pocket Expenses. All of Social Security is Off Budget Because it is Earned by Beneficiaries.

In calendar year 2021, Medicare expended $839.3 billion, of which $405.4 billion (48.3%) was budgeted. None of the $1.14 trillion expended by Social Security for earned benefits are part of the federal budget. Hence, my estimation is that of an approximately $5.5 trillion 2022 FY budget, only $.405 trillion (7.4%) was budgeted for all of Social Security (0%) and Medicare (7.4%).

The Harm Done by Misinformation

Claims that the elderly are receiving the biggest share of the annual budget dampens the public’s support for much needed assistance with out-of-pocket Medicare costs, home health care, housing assistance (including assisted living), and other essential services and financial needs for daily living. Financial moguls such as the late multi-billionaire Peter G. Peterson and conservative politicians have been leading a propaganda war against Social Security and Medicare from their inception in the 1930s and 1960s.

Many seniors are suffering due to the cost of pharmaceuticals and co-pays, deductibles, and premiums. Transportation, housing, food, along with medical care and other costs for the needs of daily living are robbing a huge proportion of the growing 65+ population of a decent life in their elderhood. The blatant falsehoods coming from some super rich Wall Streeters and conservative politicians are causing pain for hardworking people who are being denied a decent quality of life. We intend to fight back!

Does the Attack on Social Security by Conservatives Make Any Sense? Read What One of America’s Leading Experts on Social Security Has to Say.

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Max Skidmore

What About Social Security?

The Social Security Act became law in 1935 and created a system of “social insurance.” Workers pay into trust funds through deductions from wages, and employers match the workers’ contributions. Benefits are calculated on the thirty-five years of highest earnings. The maximum amount of wages subject to Social Security (FICA) tax for 2023 is $160,200. The system began to pay benefits in 1940.

Originally, the Act called only for retirement benefits, but through the years the system expanded to include payments to spouses, survivors, and the disabled. Thus, Social Security now provides life insurance, as well as retirement, and also protects against lost wages resulting from disability before one reaches retirement age.

Roughly a third of Social Security’s checks go to people younger than retirement age; that is, to survivors of deceased wage earners and to the disabled. The elderly are not the only ones who benefit from Social Security. Virtually the entire population does¾either through receipt of benefits, insurance coverage, or being freed from the necessity of caring for their elderly relatives.

Benefits are indexed to inflation, so that purchasing power remains constant through the years. Moreover, benefits continue through the lives of beneficiaries, however long they may live; one cannot outlive benefits.

As limited as the benefits are (and it would be an excellent idea and easily achievable to expand, not reduce, them), most retired Americans receive a substantial portion of their income from Social Security. For the average retiree, Social Security accounts for nearly a third of the total. More than a third of America’s retired elderly, in fact, count on Social Security for half or more of their total income. Substantial numbers of retired people have no income at all except for their Social Security. For millions of Americans, the benefits they receive from Social Security enable them to escape poverty and live in reasonable comfort.

Despite scare propaganda from groups who would profit from privatization, the system’s finances are sound. The highly publicized times for depletion of the trust funds vary from year to year, and are always based on “intermediate projections” from the annual reports from the system’s Board of Trustees. The trustees, themselves, caution in their reports that depletion years are to be considered only as estimates based on a huge number of assumptions. They are not to be taken literally.

Nevertheless, commentators  generally treat them as firm and unquestionable, and mistakenly refer to the trust funds’ impending “bankruptcy.”  This is nonsense. The projections are extremely cautious, and likely are quite pessimistic. “Bankruptcy” is not an appropriate term for a federal, tax-funded, program. FICA taxes in would continue to come in, regardless of trust fund balances. Moreover, the trustees always publish a “low-cost,” more optimistic, projection that tends to present the future of the trust funds as secure in the long run. The conditions that the low-cost options project are just as likely as the Intermediate projections to materialize. If conditions were to become less favorable to Social Security, however, it would be a simple matter to adjust tax rates, lift or remove the cap, etc. Dire warnings about “unsustainability,” are scare propaganda designed to frighten the public in hopes that they will accept unwarranted modifications to the system based on conservative ideology, not finances.

Social Security is remarkable, it keeps millions from poverty, provides them with independence, and all the while it operates at far lower expense (less than 1% for administration) than any other income-transfer system. Also, it is off budget. Lowering benefits would not affect the deficit or the national debt; it would merely build up bigger trust funds, while continuing to tax workers, but providing them with nothing for their taxes. It would not provide balance to the budget.

Why, then, is there any opposition to such an efficient and worthwhile system? Why are Republicans such as Senator Ron Johnson urging that the system should require re-authorization every year, or else vanish?

Johnson, of course, will never be considered as among the more able or thoughtful senators. Senator Rick Scott, though, until this November, was chair of the National Republican Senatorial Committee, an official Republican organization. He proposed that Social Security and Medicare be authorized only for five-year periods, ceasing to exist if Republicans gain control and fail to re-authorize them.

Most egregious of all, and openly revealing the obvious betrayal by Republicans of the decades-long consensus regarding the value of Social Security, are the bullying threats from Senator John Thune. Thune currently is number two among the hierarchy of Senate Republicans. It has just been announced that he intends to hold the debt ceiling hostage. That is, he intends to block any elevation of the debt ceiling unless there are cuts to Social Security. This reveals the reckless cruelty of current Republicans. Incidentally, it also reveals that the dangers of the “debt ceiling” that performs no useful function; it saves not one dollar, and creates opportunities to cause chaos. It only permits irresponsible politicians, such as Thune, to create mischief.

Some of the opposition arises from investment bankers and other wealthy groups who might benefit from privatization. Most, however, comes from extreme conservatives who simply do not like government programs, regardless of their many vital functions. Do they not recognize how cruel it would be to slash the incomes of those who count on it, including those of very limited income?

The cruelty is the point. Many conservatives do not ignore the cruelty that they would cause; rather, they welcome it. Ronald Reagan began to redistribute income upward, and his party has since continued to do so with a vengeance. Until recently, they generally kept their intentions hidden. Now, though, they are openly expressing their hostility to the less fortunate of their constituents. Republicans no longer find their motto embarrassing, no longer do they find it necessary to disguise it. It is, “Soak the poor, and reward the rich,” and clearly and overtly is a common theme of their proposals. They recognize few, if any, “deserving poor.” To be poor is to be fair game. Anyone who wants to avoid institutionalized cruelty should just go out and get rich.

As the Herblock cartoon in 1964  put it (portraying the message from Republican presidential candidate, Senator Barry Goldwater), the poor should simply go out and inherit department stores.

MEDICAID IS POOR PEOPLES’ MEDICINE & POOR PEOPLES’ MEDICINE IS POOR MEDICINE.

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Dave Kingsley

The Southern Segregations’ Plan to Institutionalize Racism and Inequality

In a conversation with Lyndon Johnson prior to passage of Medicare and Medicaid, the late segregationist Congressman Wilbur Mills of Arkansas told President Johnson that across town from his mother in Arkansas, “…a Negro woman has a baby every year. He went on to explain that every time he went home, his mother complained that the “Negro woman now got eleven children.  He proposed that welfare should be designed to let “the states pay for more than a small number of children if they want to.”

Joseph Califano, Jr., President Johnson’s Secretary of Health Education & Welfare (HEW) in the room at the time noted that Johnson turned to him after Mills left and said,

 “You hear that good, now.  That’s the way most members feel. They’re just not willing to say it publicly unless they come from redneck districts.”

Most member of congress aside, Mills was not your run of the mill congressman.  He was the influential Chairman of the exceedingly powerful and critical House Ways and Means Committee.  He was a product of Southern one-party politics run by the all-powerful Southern planter class.  Mills and his Southern brethren in the Senate and House had in 1957 signed and issued the “Southern Manifesto” – a protest against Brown v. Board of Education and the civil/human rights enveloped within the Supreme Court decision. 

As I will explain, these segregationists had designed and legislated a precursor to Medicaid into existence. The passage of the Mills-Kerr program in 1960 included the framework of Title 19 of the Social Security Act in 1965 (Medicaid).  Medicaid became Kerr-Mills 2.0.  Designed into Kerr-Mills was devolution of power over federal welfare to states, which would allow them to arbitrarily place onerous administrative burdens on qualified applicants and maintain a lower status for African Americans.  They were successful in keeping Hill-Burton funded hospitals segregated for ten years after Brown v. Board of Education had declared that “separate is not equal.”

The Concepts of Kerr-Mills – Especially the Power of States Over Welfare – Are Barriers to Transforming an Embarrassingly Bad U.S. Medical System

Like the Hill-Burton Act of 1945, which initiated a massive hospital building program across the U.S., Medicaid is funded by the states with federal matching funds.  Administration and regulation of Medicaid funded nursing homes have been left to the states.  Long-term care and skilled nursing operators have benefited from lax oversight and political power in state houses.  As should have been expected, legislatures and agencies have been captured by deep pocketed industrialists and are therefore likely to serve the interests of operators at the expense of ethical and humane medical care.

States and powerful interests have devised ways to siphon off Medicaid funds for the benefit of corporations and special interests.  Consequently, poverty medicine is enriching corporations and wealthy individuals (see previous posts on this blog re: The Ensign Group & Centene Corporation) while the medical care and health of poor Americans have been deteriorating.  For instance, the state of Indiana discovered a loophole in federal law that allowed the state to buy nursing home licenses from for-profit corporations and skim a considerable amount of nursing home funding off for other purposes.  The nursing homes continued to run the facilities and extract their usual cash flow as before.

Having studied cost reports submitted by thousands of nursing home facilities, I can safely conclude that the states shield the industry from exposing cash flow into and out of the system.  If you can complete daunting tasks of gaining access to legally required and public cost reports (or pay a considerable sum for them) you will discover that you are dealing with closely held corporations that are not required to make their financial statements public. Therefore, you can follow the money to a point.  But the pools of payments to their parent corporations’ shell companies are kept secret.  The public cannot see consolidated balance sheets, income statements, and cash flow statements of parent corporations and holding companies.

Without clear and honest financial information, no amount of reform of what most everyone agrees is a bad system is possible.  The industry can and does engage in misinformation and falsehoods to maintain myths that the biggest problem in long-term and skilled nursing care is skimpy government funding.